BlackRock, the world’s largest asset manager, is introducing the BlackRock Advantage Large Cap Income ETF (BALI), an exchange-traded fund that focuses on U.S. stocks that pay dividends. This new fund offers investors an additional source of income through an options-based strategy.
Generating Additional Income While Investing in Dividend-Paying Stocks
According to Jay Jacobs, the U.S. head of thematic and active equity ETFs at BlackRock, the BALI ETF will sell call options on the S&P 500 index to provide a second stream of monthly income along with the dividend payments from the selected stocks. Managed by BlackRock’s systematic investment team, the fund is set to begin trading on Thursday.
Catering to Investors Seeking Income and Potential Growth
Jacobs explains that the BlackRock Advantage Large Cap Income ETF may particularly appeal to recent retirees who desire both income and potential growth to keep up with inflation. The actively managed ETF allows investors to receive two income streams from a single fund, as shareholders benefit from “the option premium” regardless of market movement.
Market Performance and BlackRock’s Expertise
Although the U.S. stock market has faced pressure due to rising Treasury bond yields this month, it has still seen overall gains this year. As of Wednesday, the S&P 500 index experienced a 5.2% drop in September, reducing its total gains in 2023 to 11.3%.
Drawing from their expertise in options contracts, BlackRock has previously launched ETFs involving various investing strategies. In June, they introduced their first “buffer” ETFs, which aim to provide downside protection in the stock market alongside potential gains within a capped limit.
Furthermore, last year BlackRock unveiled bond ETFs designed to offer investors an additional cash flow tied to the options market.
The Expert Team Behind the New ETF
The BlackRock Advantage Large Cap Income ETF is managed by a team led by Raffaele Savi, who serves as the global head of BlackRock systematic and co-chief investment officer and co-head of systematic active equity. Jacobs emphasizes that the systematic investment team leverages valuable insights from extensive “big data” analysis encompassing various markets to inform their strategy.